According to the NAB Research Team, the Reserve Bank of New Zealand will keep the key interest rate steady on Wednesday, presenting a similar outlook to November.
Key Quotes:
“Wednesday’s RBNZ Monetary Policy Statement (MPS) is front and centre for the market this week. The Official Cash Rate is unanimously expected to be held steady at 1.75%. But the market has become increasingly aggressive in pricing the chance of a cut later this year. The Bank’s commentary will give important direction, after a virtual 3-month vacuum from the Bank in this regard. And, of course, we’ll have to wait a little longer on the day itself with MPS now scheduled to be released at 2pm , rather than 9am previously. For the record, the press conference will be at 3pm and the Governor will testify at
select committee at 8am on Thursday.”
“The news since the last policy announcement (way back at the November MPS) has, on balance, been a bit softer – mainly on global growth risks. Looking through the range of unders and overs regards the domestic data flow, there is still a strong sense that the economy is fully employed and core inflation has edged higher.”
“Close RBNZ followers will recall that the Bank dropped its reference to equally balanced risks ‘up or down’ when it produced its November MPS. There is a chance that this message is reintroduced this time around, even if with different wording.”
“We expect the Bank to reiterate a steady approach. If the RBNZ were to deviate it would be to the dovish side. We wouldn’t be surprised if the previously implied tightening was delayed for up to six months with a nod to the increase in international risks. Regular readers will know we are on the verge of pushing our own forecast of future rate hikes out into 2020 but are waiting for the MPS to provide justification.”
“For now, with global uncertainty indicators currently very high, we see the international situation as more a reason for the RBNZ to sit pat and maintain flexibility.”
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